Buying Land

How do I know if I’m paying a fair price for recreational land?

How do I know if I’m paying a fair price for recreational land?

As we see the market for recreational land sales continue to improve, one question continues to bother some prospective buyers: “How do I know if I’m paying a fair price?”

In recreational property sales, the answer isn’t necessarily as simple as, say, comparing the sales prices of homes in a residential neighborhood. After all, one of the benefits of owning land is that each parcel is unique and can be used in many ways, unlike a home that has one purpose and can fairly easily be compared to another home.

And to make this more challenging, property sales have been slow in some rural areas, making it hard for a real estate professional to find applicable pricing to use in a comparative market analysis.

With that in mind, here are five things that buyers should think about related to price, and in turn, value, in a recreational property sale:

  1. There is no one, simple answer right now as to whether prices are on the rebound for recreational property. This answer will differ depending on the geographic area. That said, in many areas of our home state of Minnesota, we are seeing prices increase, the key sign that prices have bottomed out and are on the rise.
  2. While it’s important to pay a fair price, there’s more to determining value than simply the sales price. How does a property purchase fit into your overall budget and plans for the future? And if you are seeing prices starting to increase, is it smarter to buy now than to continue to wait?
  3. In figuring out comps and understanding value, it’s critical to work with a professional who’s an expert in recreational real estate. Selling recreational property requires a unique skill set, and a different type of knowledge than what selling in a subdivision involves. This comes into play in determining sales comps that make sense. Even if there are no recent comparable sales nearby, a knowledgeable recreational real estate pro can use market knowledge and common-sense reasoning to figure out whether a sales price seems fair.
  4. The notion that there’s no financing available for recreational land is not true. Certainly, it’s a little more difficult to get financing today than it was before the recession took hold. But a number of financial institutions are lending on land. In fact, many recreational real estate professionals have relationships with banks, credit unions and other lenders – just ask them who they know.
  5. In recreational property sales, you may be wasting your time if you’re waiting for a great deal on a distressed property. Distressed sales in recreational real estate are not nearly as prevalent as they’ve been in urban areas. In our area, about 100 miles north of Minneapolis-St. Paul, we haven’t seen a large number of foreclosures or distressed sales in the second home/recreational property market. So it’s important for buyers to know that most sellers in this niche are not desperate, so a lowball offer may not get you anywhere. Consider what a fair price should be, and work from there.

Natalie Cowart is co-owner, with her brother Tom Jensen, of United Country Banning Junction Real Estate, part of the Potlatch Preferred Broker network. With deep experience in recreational real estate, she specializes in a geographic area that’s midway between the cities of Minneapolis-St. Paul and Duluth.

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About the author

United Country Real Estate

United Country Real Estate is the largest fully integrated network of conventional and auction real estate professionals in the United States and has been an innovator in real estate marketing since 1925.

3 Comments

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  • Natalie this is a timely article, and thanks for contributing. I would agree with all 5 of your points. A friend of mine, who is a car dealer, made a great point when I was searching for a truck. He said, “Don’t worry about if you’re getting the absolute best price, make sure you are happy with what you are getting.” That was good advice for land as well.

    Thanks again for writing, and I look forward to more articles from you in the future.

  • Natalie: Good article addressing “THE” big issue with lots of people – price. As a fellow Potlatch Preferred Broker, like you, we deal with land values every day. We’re always pressed on the price per acre and whether is the best price. Land has variables that have different values for different buyers – i.e. wetland may be bad for one buyer but, desirable for a deer hunter. In the end, the right price is the one that the buyer is willing to pay, the seller is willing to take and the bank/appraiser is willing to lend.

  • When purchasing recreational land it is also important to work with a broker who understands recreation land. When it comes to value in recreational land the tangible value of the acreage is often much lower than the intangible value of the enjoyment recieved by its use.

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